VAT and Free Zones in the United Arab Emirates – VAT-Free ”Designated Zones”

As one of the countries of the Gulf Cooperation Council, the United Arab Emirates introduced Value-Added Tax (VAT) across the country on January 1st, 2018 at a standard rate of 5%. This introduction of VAT in the UAE may considerably impact the competitiveness of the approximately 45 Free Zones across the country. Some of them will be treated as outside the UAE’s domestic customs area and are, hence, VAT-free. Others, on the other hand, may not enjoy this special status, implying services and goods within these Free Zones may be subject to VAT. Investment Consulting Associates (ICA) has evaluated the relevant pieces of VAT-related legislation and the impact on the attractiveness of UAE’s Free Zones and has summarized the various scenarios of treatment of VAT within Free Zones here